AEON Credit’s top-line growth resumed as management normalised the previously tightened lending policies
By LYDIA NATHAN / Pic TMR
AEON Credit Service (M) Bhd’s recent share price weakness has made its valuation more attractive with RHB Investment Bank Bhd (RHB Research) upgrading it to a ‘Buy’ from ‘Neutral’.
The research house rated AEON Credit with a target price of RM13.30, reflecting a 20% upside to its last price of RM11.08, as it saw good traction in AEON Credit’s top-line and collection growth until the second round of the Movement Control Order (MCO 2.0).
The research note said its top-line growth resumed as management normalised the previously tightened lending policies.
“Management believes the strength in the motorcycle receivables segment could be driven by demand from delivery riders like Grab or Foodpanda. Although motorcycle dealers are allowed to operate during MCO 2.0, management opines that receivable growth could be dampened as motorcycle plants are forced to halt production which could, in turn, result in supply disruption,” it said.
The research house also opined that the potential impact on AEON Credit’s bottom line will be less severe than during the first implementation of the MCO as most economic activities are currently ongoing.
“Although still rather premature, the collection remains steady before pre-Covid era based on the latest date,” RHB Research stated in a recent note on the company.
AEON Credit has set aside RM77.6 million in preemptive provisions for the first nine months of this financial year.
“We learned that RM30 million of it is mostly related to borrowers who are currently on AEON Relief Programme, while another RM15 million is due to the change in write-off policies. The remaining amount is mostly for borrowers under the Credit Counselling and Debt Management Agency and credit card balance conversion programmes.
“It also launched some relief measures in December 2020 to assist borrowers facing financial difficulties. AEON Credit estimated about 2.5% of borrowers will need repayment assistance so management will monitor and consider if more targeted relief measures are needed during this MCO 2.0,” RHB Research said.
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